SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Microsemi Corporation
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No Fee Required
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration number, or
the Form or Schedule and the date of its filing.
1. Amount previously paid:
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<PAGE>
MICROSEMI CORPORATION
---------------------
NOTICE OF ANNUAL MEETING ON FEBRUARY 29, 2000
AND PROXY STATEMENT
<PAGE>
TABLE OF CONTENTS
PROXY STATEMENT...............................................................1
GENERAL INFORMATION...........................................................1
ANNUAL REPORT.................................................................2
OUTSTANDING VOTING SECURITIES.................................................2
VOTING PROCEDURES.............................................................2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT................3
ELECTION OF DIRECTORS.........................................................5
DIRECTORS.....................................................................5
EXECUTIVE OFFICERS............................................................6
INFORMATION REGARDING THE BOARD OF DIRECTORS AND ITS COMMITTEES...............7
EXECUTIVE COMPENSATION........................................................8
SUMMARY COMPENSATION TABLE....................................................8
OPTION GRANTS IN LAST FISCAL YEAR.............................................9
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END
OPTION VALUES................................................................9
EXECUTIVE COMPENSATION AGREEMENTS.............................................10
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS................................11
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE.......................11
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION...................12
COMPENSATION COMMITTEE REPORT FOR FISCAL YEAR 1999 OF MICROSEMI
CORPORATION.................................................................12
THE COMPENSATION COMMITTEE....................................................14
PERFORMANCE GRAPH.............................................................15
AMENDMENT OF THE 1987 PLAN (PROPOSAL 2).......................................16
STOCKHOLDER PROPOSALS.........................................................23
INDEPENDENT ACCOUNTANTS.......................................................23
OTHER MATTERS.................................................................23
<PAGE>
MICROSEMI CORPORATION
P.O. Box 26890
Santa Ana, California 92799-6890
---------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held on February 29, 2000
---------------------
TO THE STOCKHOLDERS OF MICROSEMI CORPORATION:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of
MICROSEMI CORPORATION (the "Company") will be held at the offices of the
Company, 2830 South Fairview Street, Santa Ana, California 92704, on Tuesday,
February 29, 2000 at 10:00 a.m., Pacific Standard Time, for the following
purposes:
1. To elect five (5) directors, each for the term of one (1) year or
until his successor shall have been duly elected and qualified
(Proposal 1);
2. To approve Amendments to the 1987 Microsemi Corporation Stock Plan;
and
3. To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only stockholders of record at the close of business on January 14, 2000
are entitled to notice of and to vote at the meeting or any adjournments or
postponements thereof.
By Order of the Board of Directors,
Santa Ana, California /s/ DAVID R. SONKSEN
January 20, 2000 --------------------------------------
David R. Sonksen
Secretary
<PAGE>
IT IS IMPORTANT THAT ALL STOCKHOLDERS BE REPRESENTED AT THE ANNUAL MEETING.
STOCKHOLDERS, WHETHER THEY EXPECT TO ATTEND THE MEETING IN PERSON OR NOT, ARE
REQUESTED TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY. PROXIES ARE
REVOCABLE AT ANY TIME PRIOR TO BEING VOTED AT THE ANNUAL MEETING, AND
STOCKHOLDERS OF RECORD WHO ARE PRESENT AT THE MEETING MAY WITHDRAW THEIR PROXIES
AND VOTE IN PERSON IF THEY SO DESIRE.
Additional copies of proxy materials should be requested in writing, addressed
to:
Microsemi Corporation, P.O. Box 26890, Santa Ana, California 92799-6890,
Attention: David R. Sonksen, Secretary.
<PAGE>
MICROSEMI CORPORATION
P. O. Box 26890
Santa Ana, California 92799-6890
---------------------
PROXY STATEMENT
GENERAL INFORMATION
The accompanying Proxy is solicited by the Board of Directors and
Management of Microsemi Corporation (the "Company") to be used at the Annual
Meeting of Stockholders to be held on Tuesday, February 29, 2000, at 10:00 a.m.,
Pacific Standard Time, at the offices of the Company, 2830 South Fairview
Street, Santa Ana, California 92704, and at any adjournments or postponements
thereof (the "Meeting"). Shares represented by a valid Proxy in the enclosed
form ("Proxy") will be voted as specified if executed and received in time for
the Meeting. If a choice is not specified in the Proxy, the Proxy will be voted
FOR the election of all of the director nominees listed.
A stockholder who executes and returns the accompanying Proxy may revoke
it at any time prior to its being voted by signing another Proxy bearing a later
date, or by signing a written notice of revocation and, in either case,
delivering the proxy or notice to the Secretary of the Company by mail prior to
the Meeting or in person at the Meeting. Execution of the Proxy will not in any
way affect a stockholder's privilege to attend the Meeting and to vote in
person, provided that the stock is held of record in the stockholder's name.
The costs of Proxy solicitation will be paid by the Company. It is
contemplated that Proxies will be solicited principally through the use of the
mails. The Company will reimburse banks, brokerage houses, and other custodians,
nominees or fiduciaries for their reasonable expenses in forwarding proxy
material to the beneficial owners of the shares held by them. Proxies may be
solicited by directors, officers or other regular employees of the Company in
person or by telephone or facsimile as part of their regular duties and without
special payment therefor, except reimbursement of incidental costs.
This Notice of Annual Meeting, Proxy Statement and Proxy are first being
mailed to stockholders on or about January 28, 2000.
1
<PAGE>
ANNUAL REPORT
-------------
The Annual Report to Stockholders for the fiscal year ended October 3,
1999, including the audited financial statements, accompanies this Proxy
Statement. Such report is not to be regarded as proxy soliciting material and is
not incorporated into this Proxy Statement. THE ANNUAL REPORT TO STOCKHOLDERS
AND THE FORM 10-K, INCLUDING ANNUAL FINANCIAL STATEMENTS, CAN BE OBTAINED BY ANY
STOCKHOLDER ENTITLED TO VOTE AT THE MEETING UPON WRITTEN REQUEST. SEND REQUESTS
TO MICROSEMI CORPORATION, P.O. BOX 26890, SANTA ANA, CALIFORNIA 92799-6890,
ATTENTION: DAVID R. SONKSEN, SECRETARY.
OUTSTANDING VOTING SECURITIES
-----------------------------
The Company's Common Stock, $.20 par value per share ("Common Stock"),
constitutes the only class of outstanding securities of the Company entitled to
notice of and to vote at the Meeting, including any adjournments or
postponements thereof. On January 14, 2000 ("Record Date") the Company had
issued and outstanding 10,919,979 shares of Common Stock (exclusive of shares
held in the treasury). Only holders of record of the Common Stock at the close
of business on the Record Date will be entitled to vote at the Meeting,
including any adjournments or postponements thereof. Each such holder of record
is entitled, for all purposes, to one vote for each share so held on each matter
submitted to a vote of stockholders.
VOTING PROCEDURES
-----------------
A quorum sufficient for the conduct of business at the Meeting will
consist of a majority of the outstanding shares of Common Stock at the close of
business on the Record Date.
Proxies marked as abstentions and proxies for shares held in street name
designated by brokers as not voted will be treated as shares present for
purposes of determining the presence of a quorum at the Meeting.
Proposal 1, the election of directors, will be determined by a plurality
vote, i.e., the stockholders elect those individuals up to the number of
individuals to be elected receiving a number of votes greater than the number of
votes for any other nominees who receive votes.
Proposal 2, Amendments to Microsemi Corporation 1987 Stock Plan, will be
determined by a majority vote, i.e. the affirmative vote of the holders of a
majority of the Common Stock of the Company represented at the Annual Meeting
and voting on Proposal 2 shall be required to approve this proposal.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
--------------------------------------------------------------
The following table sets forth as of December 1, 1999, information
concerning ownership of the Company's Common Stock by each director or executive
officer, all officers and directors as a group, and each person known by the
Company to own beneficially more than 5% of its outstanding Common Stock.
Name of Beneficial Owner
(and Address of Each 5%
Beneficial Owner) or Amount and Nature of Percentage
Number of Persons in Group Beneficial Ownership of Class
- -------------------------- -------------------- --------
Norman J. Wechsler
105 South Bedford Road, Suite 310
Mount Kisco, NY 10549 1,582,973 (1) 14.5%
Wellington Management Company, LLP 1,207,900 11.1%
75 State Street
Boston, MA 02109
FMR Corp. 1,176,540 10.8%
82 Devonshire Street
Boston, MA 02109
Brinson Partners, Inc. 893,900 8.2%
209 South LaSalle Street
Chicago, IL 60604-1295
Philip Frey, Jr.
P. O. Box 26890
Santa Ana, CA 92799-6890 1,013,353 (2) 9.2%
Joseph M. Scheer 21,900 (3) *
Martin H. Jurick 18,500 (4) *
Brad Davidson 21,000 (5) *
Robert B. Phinizy 17,000 (6) *
David R. Sonksen 47,743 (7) *
Harold R. McKeighan 53,650 (8) *
Andy T. S. Yuen 63,400 (9) *
Lane Jorgensen 44,200 (10) *
All executive officers and directors
as a group (12) 1,342,711 (11) 12.1%
*Indicates less than 1%
3
<PAGE>
(1) Includes 13,070 shares owned by others and over which there is shared
voting and dispositive power, and 1,269,903 shares owned by Wechsler &
Co., Inc.
(2) Includes 36,950 shares under an option exercisable as of the date of this
information or within 60 days.
(3) Includes 16,000 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(4) Includes 16,000 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(5) Includes 11,000 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(6) Includes 17,000 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(7) Includes 17,425 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(8) Includes 28,150 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(9) Includes 22,150 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(10) Includes 38,200 shares under options exercisable as of the date of this
information or within 60 days thereafter.
(11) Includes 214,350 shares under options exercisable as of the date of this
information or within 60 days thereafter.
4
<PAGE>
ELECTION OF DIRECTORS
---------------------
(Proposal 1)
The Bylaws of the Company allow for a Board of Directors consisting of not
less than three (3) and up to thirteen (13) members as fixed by the Board from
time to time, and the Board currently has fixed the number of directors at five
(5). Accordingly, five (5) directors shall be elected at the Meeting, and the
five (5) nominees named below are proposed by Management. The nominees proposed
for election as directors will serve for a term of one year or until their
successors are elected and qualified. All nominees have consented to be named
and have indicated their intent to serve if elected. While Management has no
reason to believe that any nominee will be unable to or will not serve as a
director, should any nominee become unable to serve or will not, for good cause,
so serve, the persons named in the enclosed Proxy will have authority to vote
for any substitute nominee designated by the Board of Directors.
The five (5) candidates in the election of directors receiving the highest
number of affirmative votes will be elected. Votes against a candidate or votes
withheld, including abstentions and broker non-votes, have no legal effect on
the election; however all such votes count as a part of the quorum. The names
and certain information concerning the persons to be nominated as Directors by
the Board of Directors at the Meeting are set forth below. Your Board of
Directors recommends that you vote for the election of each of the nominees
named below. ---
DIRECTORS
---------
Name Position With Company (in Addition to Age Director
Director) and Principal Occupation Since
during Last Five Years
- --------------------------------------------------------------------------------
Philip Frey, Jr. Chairman of the Board since February 26, 72 1972
1987; President and Chief Executive
Officer since 1971
Brad Davidson President of Securities Pricing and 44 1984
Research, Inc. since 1986
Robert B. Phinizy Private investor and consultant; 73 1992
Director of Genisco/Solaris and
Corporate Secretary since 1997;
Chairman, Chief Executive Officer and
President of Genisco Technology Corp.
from 1972 to 1986; Director of BioSonics,
Inc. and Corporate Secretary since 1993;
Retired Captain, United States Navy (R)
Joseph M. Scheer Private investor and consultant; 73 1994
Director of Rawson-Koenig Inc., Houston,
Texas since 1991; Member Advisory Board
Soligen Inc., Northridge, California
since 1994; Director of Laserform, Inc.,
Auburn Hills, Michigan from 1989-1994
Martin H. Jurick Private investor and consultant; Senior 62 1995
Vice President of Corporate Planning and
Director of Silicon Systems, Inc.,
(later of a division of Texas
Instruments); 1978-1999; Director of
Level One Communications since 1991
5
<PAGE>
EXECUTIVE OFFICERS
------------------
Officers are elected on an annual basis by the Board of Directors and
serve at the discretion of the Board. Information is provided under the heading
"Directors" for Mr. Philip Frey, Jr.
Name Position with Company and Principal Age Officer
Occupation during Last Five Years Since
- --------------------------------------------------------------------------------
David R. Sonksen Vice President-Finance, Chief Financial 54 1986
Officer, Treasurer and Secretary since
1986
Andy T.S. Yuen Vice President International Operations 47 1989
since 1989
James M. Thomas Vice President Human Resources since 62 1989
1989
James R. Shiring Vice President, East Coast Operations 58 1999
since 1999; Vice President and General
Manager of BKC Semiconductors
Incorporated since 1998; President of
BKC Semiconductors Inc. since 1996;
Managing Director, European Operations
of CP Clare Corporation 1982 to 1995
Harold R. McKeighan Vice President and General Manager of 57 1985
Microsemi Corporation-Scottsdale since
1985
Lane Jorgensen Vice President and General Manager of 58 1992
Microsemi Corporation-Santa Ana since
1992
James J. Peterson Vice President and General Manager of 44 1999
LinFinity, A Microsemi Company-Garden
Grove since 1999; President of LinFinity
MicroElectronics 1997 to 1999; Vice
President of Sales of LinFinity
MicroElectronics 1996 to 1997; Senior Vice
President, Worldwide Sales & Corporate
Communications of Texas Instruments Storage
Products Group-Tustin 1984 to 1996
6
<PAGE>
INFORMATION REGARDING THE BOARD OF
----------------------------------
DIRECTORS AND ITS COMMITTEES
----------------------------
During the 1999 fiscal year, the Board of Directors held a total of four
(4) regularly scheduled or special meetings.
The Audit Committee, consisting of directors Robert B. Phinizy, Joseph M.
Scheer and Martin H. Jurick, reviews matters relating to the Company's internal
and external audits. The Audit Committee held a total of two (2) meetings in
fiscal year 1999 to review the fiscal year 1998 financial statements and audit
and to review the plans for the fiscal year 1999 audit.
The Compensation Committee, consisting of directors Brad Davidson, Martin
H. Jurick and Joseph M. Scheer, considers and approves the grant of stock
options to and compensation for the Company's key employees. The Compensation
Committee held one (1) meeting in fiscal year 1999.
No standing committee of the Company has a function similar to the
function of a "Nominating Committee."
No director, during the period while serving as a Director or on any
committees, attended fewer than 75% of the aggregated number of meetings held in
fiscal year 1999 of the Board of Directors and of all relevant committees.
During fiscal year 1999, directors who were not also officers of the
Company each were paid a quarterly retainer fee of $2,650, plus fees of $1,060
for each Board of Directors meeting attended and for each committee meeting
attended. Committee members were also paid the following:
Compensation Committee Chairman $2,400
Member $1,200
Audit Committee Chairman $1,400
Member $ 700
7
<PAGE>
EXECUTIVE COMPENSATION
----------------------
The following table sets forth, for the fiscal year ended October 3, 1999,
compensation received by Messrs. Frey, Sonksen, McKeighan, Yuen and Jorgensen.
The notes to these tables provide additional specific information regarding
compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------- ------------------------------
Long-Term
Restricted Incentive
Stock Plan All Other
Name and Fiscal Salary Bonus Other Award(s) Options Payouts Compensation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
- ------------------ ---- ------ ----- ----- -------- ------- ------- ------------
(2)
<S> <C> <C> <C> <C> <C>
Philip Frey, Jr
President, Chairman of 1999 364,568 -- 56,767 -- 13,200 -- 3,783
the Board, Director and 1998 344,462 225,267 56,829 -- 9,800 -- 4,341
Chief Executive Officer 1997 323,841 264,000 (1) -- 9,800 -- 3,274
David R. Sonksen
Vice President-Finance, 1999 197,832 -- (1) -- 8,500 -- 5,000
Treasurer, Secretary 1998 187,928 97,901 (1) -- 6,100 -- 6,074
and Chief Financial 1997 176,869 107,474 (1) -- 6,100 -- 5,084
Officer
Harold R. McKeighan
Vice President, General 1999 177,054 -- (1) -- 8,500 -- 4,319
Manager-Microsemi 1998 166,632 46,724 (1) -- 6,100 -- 3,396
Scottsdale 1997 160,424 96,169 (1) -- 6,100 -- 3,169
Andy T.S. Yuen
Vice President 1999 150,133 -- (1) -- 8,500 -- 3,386
International Operations 1998 142,512 74,149 (1) -- 6,100 -- 3,386
1997 134,430 81,795 (1) -- 6,100 -- 3,861
Lane Jorgensen
Vice President, General 1999 147,600 -- (1) -- 8,500 -- 5,106
Manager-Microsemi 1998 139,242 72,537 (1) -- 6,100 -- 5,002
Santa Ana 1997 128,574 80,034 (1) -- 6,100 -- 5,600
</TABLE>
(1) The Company has concluded that the aggregate amount of perquisites and
other personal benefits paid in such period did not exceed the lesser of
10% of such officer's total annual salary and bonus for each of 1999, 1998
and 1997, respectively, or $50,000. Such perquisites have not been
included in the table.
(2) Represents amounts contributed in 1999, 1998 and 1997 under the Company's
401(k) plan under which the Company matches, up to the annual federally
mandated maximum amounts, an employee's contributions of up to 3% of such
employee's annual salary.
8
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
---------------------------------
<TABLE>
<CAPTION>
Individual Grants
Potential Realizable
% of Total Value at Assumed
Options Annual Rates of Stock
Granted to Price Appreciation
Options Employees Exercise Grant Date For Option Term(1)
Granted in Fiscal Price Expiration Present ------------------
Name (#) Year ($/Share) Date Value ($) 5%($) 10%($)
- ------------------- --- ---- --------- ---- --------- ----- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Philip Frey, Jr. 13,200 3.2% $12.375 11/17/2008 $163,350 $102,730 $260,338
David R. Sonksen 8,500 2.0% $12.375 11/17/2008 $105,188 $66,152 $167,642
Harold R. McKeighan 8,500 2.0% $12.375 11/17/2008 $105,188 $66,152 $167,642
Andy T.S. Yuen 8,500 2.0% $12.375 11/17/2008 $105,188 $66,152 $167,642
Lane Jorgensen 8,500 2.0% $12.375 11/17/2008 $105,188 $66,152 $167,642
</TABLE>
(1) The Potential Realizable Value is calculated based on the fair market
value of the Common Stock on the date of grant, which is equal to the
exercise price of options granted in fiscal 1999, assuming that the stock
appreciates in value from the date of grant until the end of the option
term at the specified annual rates (5% and 10%). Potential Realizable
Value is net of the option exercise price. The assumed rates of
appreciation are specified in rules of the SEC, and do not represent the
Company's estimate or projection of future stock price. Actual gains, if
any, resulting from stock option exercises and Common Stock holdings are
dependent on the future performance of the Common Stock, overall stock
market conditions, as well as the option holders' continued employment
through the exercise/vesting period. There can be no assurance that the
amounts reflected in this table will be achieved.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR END OPTION VALUES
---------------------------------------------------
<TABLE>
<CAPTION>
Shares Number of Unexercised Value of Unexercised
Acquired Value Options at Fiscal In-the-Money Options
on Exercise Realized Year End (#) at Fiscal Year End ($)
Name (#) ($) Exercisable Unexercisable Exercisable Unexercisable
- -------------------- --- --- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Philip Frey, Jr. -- -- 26,300 27,900 195,605 207,506
David R. Sonksen -- -- 10,725 17,650 79,761 131,272
Harold R. McKeighan -- -- 21,450 17,650 159,534 131,272
Andy T. S. Yuen -- -- 15,450 17,650 114,909 131,272
Lane Jorgensen 6,000 80,000 31,500 17,650 234,281 131,272
</TABLE>
9
<PAGE>
EXECUTIVE COMPENSATION AGREEMENTS
---------------------------------
In fiscal year 1993, the Company adopted a Supplemental Employee
Retirement Plan ("SERP"), in which the only participants are eight (8) then
long-standing employees, including Mr. Frey. The SERP agreements provide annual
payments for 10 years following the participant's retirement (age 66 or later).
The annual payments range from 20% to 30% (30% for Mr. Frey) of the
participant's final or designated year's salary. It is not possible to state in
advance the exact amount of future commitments under the SERP. The amounts that
would be due annually, after retirement, to Mr. Frey would be estimated at
$113,000.
The Company has entered into agreements with Messrs. Frey and Sonksen to
assure their unbiased counsel and continued dedication in the event of an
unsolicited tender offer or other occurrence that may result in a change of
control. Each agreement will continue in effect until two (2) years after either
party notifies the other of an intention to terminate the agreement. The terms
of the agreements provide that, in the event of a change of control, as defined
therein, and the termination of the executive's employment at any time during
the term of such agreement, the executive will be paid amounts equal to a
multiplier (the "Multiplier") times the sum of his annual salary rate in effect
prior to termination of employment and his highest annual bonus paid during the
prior 3-year period. The Multiplier is equal to the sum of three plus the number
of years of service of the executive, all divided by twelve; provided, however,
in the event of involuntary termination by the Company or termination by the
executive for "Good Reason", the Multiplier will in no event be less than two
(2). Presently Mr. Frey has 27 years of service and Mr. Sonksen has 13 years of
service. Additionally: (i) all options that the executive has received under any
option plans will remain exercisable for one year; (ii) medical, dental, vision
and life insurance premiums will continue to be paid by the Company for a number
of years equal to the Multiplier; (iii) his automobile allowance continues,
subject to earlier termination if the executive becomes a full time employee
elsewhere, up to a number of years equal to the Multiplier; and (iv) he will
receive all other benefits then accrued under the Company's compensation plans.
Upon an involuntary termination or a termination for "Good Reason" following a
change of control, all of the executive's unvested stock options, or similar
equity incentives, vest and become exercisable. Also, to the extent that
payments to the executive pursuant to his agreement (together with any other
payments or benefits) would result in the triggering of the provisions of
Sections 280G and 4999 of the Internal Revenue Code ("Code"), the agreement
provides for the payment of an additional amount such that the executive would
receive, net of excise taxes, the amount he would have been entitled to receive
in the absence of the excise tax provided in Section 4999 of the Code.
10
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
No person who acted as a director or an executive officer of the Company
and no security holder known to the Company to own of record or beneficially
more than five percent of any class of the Company's voting securities, or any
members of their respective immediate families, is known to have any material
interest, direct or indirect, in any transaction or proposed transaction during
the fiscal year ended October 3, 1999 in which the amount involved exceeds
$60,000 and to which the Company or any subsidiary was or during the next fiscal
year is to be a party.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers, directors and persons who own beneficially more
than ten percent of a registered class of the Company's equity securities to
file reports of ownership and changes in ownership with the Securities and
Exchange Commission (the "SEC") and the Nasdaq Stock Market ("NASDAQ").
Executive officers, directors and greater than ten-percent stockholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms concurrently when they file them with the SEC and NASDAQ.
To the Company's knowledge based solely on its review of the copies of
Section 16(a) forms furnished to the Company and any written representations
that no Form 5 reports were required, none of the Company's officers, directors
or greater than ten-percent beneficial owners known to the Company failed to
file in a timely manner Section 16(a) reports during or with respect to fiscal
1999, except with respect to Form 5's as follows:
Number of Reports
------------------------------------
Name Not Timely Filed Not Filed
---- ---------------- ---------
Philip Frey, Jr. 1 0
Brad Davidson 1 0
Robert B. Phinizy 1 0
Joseph M. Scheer 1 0
Martin H. Jurick 1 0
David R. Sonksen 1 0
Andy T.S. Yuen 1 0
James M. Thomas 1 0
Harold R. McKeighan 1 0
Lane Jorgensen 1 0
James J. Peterson 1 0
11
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
-----------------------------------------------------------
No member of the Compensation Committee during the 1999 fiscal year was an
officer or employee of the Company or any of its subsidiaries or was formerly an
officer of the Company or any of its subsidiaries.
COMPENSATION COMMITTEE REPORT FOR FISCAL YEAR 1999 OF
MICROSEMI CORPORATION
The compensation programs for executive management and certain other key
employees are reviewed each year by the Compensation Committee. The committee
considers the program's impact on each operating unit as well as the effect on
corporate growth, profit, market position and goals set for that year, as well
as changes in corporate market focus and strategic goals for the next fiscal
year. The committee reviews with the management of the Company the business
plans for the new fiscal year and compares them to the prior year. This review
defines the relative potential contribution for each operating unit and together
with discussions between corporate management and the managers of each unit,
establishes goals for revenue and profits for participating profit center
managers. The Compensation Committee then establishes the rewards to be received
by each key executive relative to their contributions to net earnings from both
their direct operating responsibility and the overall profits of the
corporation. The committee also decides which operating units will be included
in this measured program. Certain special profit centers are removed from the
measured plan where the strategic goal assignments are not properly measured
quantitatively. These smaller or special profit centers are placed into a second
award pool from which bonus payments are allocated based on the achievement of
more subjective goals set by the corporate management. The Compensation
Committee reviews these yearly with the corporate management and monitors the
allocation process.
In addition, each operating unit key executive is responsible for meeting other
strategic goals mutually agreed to between that key executive and the CEO. The
goals typically are strategic opportunities and challenges available to the
Company in a changing market with competitive environments. In every reward
review, the key executive is evaluated on: corporate earnings, divisional
earnings, and subjective analysis on the goals achieved or progress achieved.
Executive Compensation Philosophy
The primary thrust of the compensation programs in the Company continues to
follow the belief that compensation must reflect the value created for the
stockholders - both immediate and long term and consequently, the compensation
programs reflect the following specific thesis:
o Rewards are tailored to fit the unique opportunities available to each
business unit as well as the contributions each business unit makes to the
corporate earnings and growth. The program utilizes short term achievement
awards and long term incentives, normally stock options granted each year.
The stock option grants are reviewed by the Compensation Committee, which
manages the program. Grants can be in either or both qualified and
non-qualified stock options. The executives with the potential to impact
the future growth and profitability of the Company are granted new options
each year. Options typically have a 5-year vesting schedule and provide
incentives for executives to increase the value of the Company over the
long term.
12
<PAGE>
Salary reviews for the top executives are conducted each year. The committee
conducted a formal study with an outside consultant to guide the Company in
setting salary levels. The Company has followed the consultant's study results,
which yielded industry comparatives, for overall increases in pay and benefits.
Only minor adjustments have been required.
The Executive Compensation components are:
o Base Salary: Salaries are set at levels approximating the fiftieth
percentile for similar marketplace orientations. This year the CEO and the
Compensation Committee reviewed each of the 14 highest paid executives and
set the following year's pay for these executives. Factors considered,
although subjectively and informally applied, are actual achievement,
level of market opportunity, management skill in achieving goals and
contributions to the overall corporate success. In fiscal 1999, the
increases for key executives based on these factors ranged from 3.7% to 6%
of base salary.
o The Cash Bonus Program: The Plan, as in prior years, provides cash awards
to executives and has been the means of achieving superior corporate
results with slightly lower over-all executive compensation as compared to
similar companies. These programs are formalized and consistently
administered throughout the Company. The bonus award can range from 0% to
80% of an executive's annual salary. The bonus award components are based
on overall corporate profit performance, direct profit results controlled
by the executive and on subjective goals. For fiscal year 1999, the goals
that were set for the Company's executive officers were not achieved.
Therefore, no executive bonuses were paid for fiscal year 1999.
o Stock Options: Based on the current stock option plan as approved by the
stockholders, up to 2% of the current outstanding shares of Common Stock
are available annually for award to new and existing executives. Under
this program key executives are allocated portions of the total annual
award based upon the executive's responsibility level and other subjective
measures. The Company continues to believe that the stockholders' value is
being significantly enhanced by this stock option program. Executives who
are deemed to have the potential to impact the future growth and
profitability of the Company are granted new options each year, without
regard to the number of options or shares that may already have been
issued to such executives.
Mr. Frey's Fiscal Year 1999 Compensation:
Mr. Frey's compensation for fiscal year 1999 consisted of a base salary, stock
options and amounts under certain employee benefit plans. Mr. Frey's base salary
is deemed to be competitive with companies of a similar size based on an outside
consultant survey. His annual bonus can range from 0% to 80% of his annual
salary based upon two factors: 80% of this amount is based upon the overall
financial performance of the Company and 20% upon his individual performance as
an executive officer. The long-term portion of Mr. Frey's compensation is based
primarily on stock options. The value of the stock option award is designed to
be consistent with competitive practices of similar sized companies based on
informal comparisons. In fiscal year 1999, Mr. Frey's salary increased 6% over
fiscal year 1998 levels. Mr. Frey was not paid a cash bonus for fiscal year
1999. The salary increase was attributable to corporate improvements in fiscal
1999, as well as various subjective factors considered by the committee.
13
<PAGE>
The Compensation Committee has reviewed the performance of the Company and its
executives for 1999.
THE COMPENSATION COMMITTEE
Brad Davidson Martin H. Jurick Joseph M. Scheer
14
<PAGE>
PERFORMANCE GRAPH
-----------------
The following graph compares the five-year cumulative total return on
the Company's Common Stock to the total returns of 1) NASDAQ Stock Market and 2)
NASDAQ Stock - Electronic & Electrical Equipment & Components, excluding
Computer Equipment. This comparison assumes in each case that $100 was invested
on September 30, 1994 and all dividends were reinvested. The Company's fiscal
year ends on or about September 30 each year.
[PERFORMANCE GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
09/30/94 09/29/95 09/27/96 09/26/97 09/25/98 10/01/99
<S> <C> <C> <C> <C> <C> <C>
MICROSEMI 100.0 261.5 218.1 383.3 165.3 165.3
NASDAQ STOCK MARKET 100.0 138.1 164.3 224.5 235.2 370.5
NASDAQ ELECTRONIC COMPONENTS STOCKS 100.0 199.4 239.9 419.1 344.0 689.9
</TABLE>
15
<PAGE>
AMENDMENT OF THE 1987 PLAN
(Proposal 2)
The Company's stockholders approved the 1987 Microsemi Corporation Stock
Plan (the "1987 Plan") February 26, 1987, effective December 15, 1986, the date
on which the Board of Directors adopted the 1987 Plan. The Company's
stockholders approved certain amendments of the 1987 Plan on February 25, 1994,
as adopted by the Board of Directors on December 20, 1993. In 1995, and from
time to time, the Company's Board of Directors adopted additional amendments and
the Committee has adopted policies and interpretations of the 1987 Plan.
The principal features of the Plan are summarized below, but the summary
is qualified in its entirety by reference to the Plan itself, as amended. Copies
of the Plan and of the proposed amendment will be available at the Meeting or
should be requested in writing addressed to Microsemi Corporation, P.O. Box
26890, Santa Ana, California 92799-6890, Attention: David R. Sonksen, Secretary.
The principal purpose of the 1987 Plan is to enhance the Company's ability
to attract and retain qualified persons as key employees or directors and to
motivate such persons by providing them with the opportunity for an equity
participation in the Company.
Amendments
1. Amendment to Increase the Number of Shares Available under the 1987 Plan.
-------------------------------------------------------------------------
The proposed amendment, which is described below, will increase the
maximum number of shares of Common Stock available for awards granted under the
1987 Plan. As of December 8, 1999, approximately 131,413 shares were available
for future grants under the 1987 Plan. The proposed amendment will immediately
increase that amount and will provide for larger annual increases in successive
future years than presently provided by the 1987 Plan.
The proposed amendment will increase the maximum number of shares of
Common Stock available for awards under the Plan. Upon adoption of the
amendment, the initial increase will be 300,000 shares plus 230,400 shares (an
additional 2% of the outstanding stock) so that the annual increase as of the
beginning of fiscal 2000 would be 4% (the 1987 Plan currently provides for 2%
increases annually). Thereafter, as of the beginning of fiscal year 2001 and
each successive fiscal year until termination of the Plan, the number of shares
available under the Plan will increase by an amount equal to 4% of the total
shares of Common Stock of the Company outstanding as of each such date. For
purposes of illustration only, if the number of shares outstanding as of the end
of the Company's fiscal year ending in 2000 is 11,000,000 then the number of
shares available for purposes of the Plan will be increased as of such date by
an additional 440,000 (4% of 11,000,000), and so forth as of the beginning of
each fiscal year until the Plan is terminated. The proposed amendment further
provides that, notwithstanding the provision for annual increases in the number
of shares available under the 1987 Plan, the maximum number of shares which may
be issued pursuant to incentive stock options granted under the 1987 Plan may
not exceed 7,000,000, an increase of 3,000,000 from the current limit.
16
<PAGE>
Any award which expires or lapses without being exercised, and shares of
restricted stock which are forfeited to or repurchased by the Company, will
again be available for use under the 1987 Plan. No change is made to the
existing provision of the 1987 Plan that shares relating to this provision.
The purpose of the proposed amendment is to provide additional shares for
grants to be made under the 1987 Plan in order for it to continue to serve its
primary purposes and have adequate amounts of shares available in light of an
increased employee base and a more competitive labor environment, as well as the
Company's plans to increase the size of the Board of Directors. The primary
purpose for the annual increases to the maximum number of shares available for
awards is to alleviate the administrative costs of periodically seeking
stockholder approval of incremental increases.
2. Amendment to Extend the Termination Date of the 1987 Plan.
----------------------------------------------------------
The proposed amendment would extend the term of the 1987 Plan to December
15, 2009, unless earlier terminated by the Board of Directors or extended by an
amendment approved by the stockholders of the Company. Currently, the 1987 Plan
will expire December 15, 2004 unless earlier terminated by the Board of
Directors or extended by an amendment approved by the stockholders of the
Company.
The Board of Directors has adopted the extension of the 1987 Plan to
December 15, 2009, subject to stockholder approval, in order that the 1987 Plan
continue beyond its existing termination date to serve the purposes for which it
was adopted without incurring any administrative cost to propose and adopt a new
plan.
The annual increases in the number of shares subject to the 1987 Option
Plan as amended will continue during its extended term.
3. Amendment to Add Flexibility of Grants to Non-Employee Directors and other
--------------------------------------------------------------------------
Non-Employees.
- --------------
The proposed amendment would make non-employees eligible for grants under
the 1987 Plan, such as non-employee officers, in addition to employees.
Currently non-employee directors are eligible to participate in the 1987 Plan to
the extent of receiving annual grants in fixed amounts. This amendment will
allow discretionary grants (as well as these annual grants) to be made to
non-employee directors. This also will allow discretionary grants to other
non-employees, such as non-employee officers or consultants. There are an
indeterminate number of additional persons that may become eligible for grants
if this amendment is approved.
Further, adoption of this amendment constitutes ratification and approval
of annual non-employee director grants that exceeded the annual option grants as
to 1,000 shares provided in the 1987 Plan at the time of the last
stockholder-approved amendment. At present, and at the prior three annual
grants, the amount has been 3,000 per non-employee director. The amounts set
forth in the following table are the aggregate of the amounts granted in fiscal
years 1998, 1999 and 2000 as automatic annual option grants to non-employee
directors:
17
<PAGE>
NEW PLAN BENEFITS*
1987 Plan
---------------------------------
Name and Position Dollar Value($) Number of Units
- ----------------- --------------- ---------------
Brad Davidson $ 78,187 9,000
Director
Robert B. Phinizy $ 78,187 9,000
Director
Joseph M. Sheer $ 78,187 9,000
Director
Martin H. Jurick $ 78,187 9,000
Director
- ----------
* Includes only the automatic annual grants to non-employee directors for three
years. All options were granted at an exercise price equal to the closing sale
price of the Common Stock on the date of grant. The dollar value is calculated
as if equal to the fair market value for the Company's Common Stock as of
January 11, 2000, based on the $8.6875 closing price on that date as reported by
The Nasdaq Stock Market. This amount does not deduct the exercise price required
to be paid for the shares upon exercise. It is not possible to determine the
amount or timing of any future discretionary grants, and nothing is included for
such grants.
The purpose of this amendment is to allow the Company to attract and
retain non-employee directors, key officers and service providers in a highly
competitive environment, and to provide incentive to non-employees to devote
their utmost effort and skill to the advancement and betterment of the Company
by permitting them to participate in the ownership of the Company and thereby in
the success and increased value of the Company. The Company plans to invite
additional highly qualified persons to join its Board of Directors and believes
this amendment is essential for that purpose.
18
<PAGE>
General Terms of the 1987 Plan Currently (after Amendment)
The 1987 Plan provides for the grant by the Company of stock options,
stock appreciation rights ("SARs"), shares of Common Stock or cash. Information
regarding awards under the Plan during the 1999 fiscal year is set forth in this
Proxy Statement under the caption "Option Grants in Last Fiscal Year." The
aggregate number of shares of Common Stock subject to the 1987 Plan will be
2,420,814, while it is currently 1,890,414 shares. The aggregate number of
shares of the Common Stock of the Company that may be issued or transferred to
grantees under the 1987 Plan will be approximately 18.1% of the Common Stock on
a fully-diluted basis, while currently they represent 14.6% of the Common Stock
on a fully-diluted basis (in each case based on the presently outstanding shares
of the Company's Common Stock plus the shares that would be outstanding on
exercise of all options that are authorized). In addition, each year the number
of shares subject to the 1987 Plan will increase by an amount equal to 4% of the
outstanding Common Stock of the Company, through the beginning of fiscal year
2009, while currently the increases are 2% per year through the beginning of
fiscal year 2004. The shares may be unissued shares or treasury shares. If there
is a stock split, stock dividend, or other relevant change affecting the
Company's shares, appropriate adjustments will be made in the number of shares
that can be issued or transferred in the future and in the number of shares and
price in all outstanding grants made before the event. If shares under a grant
are not issued or transferred, those shares will again be available for
inclusion in future grants.
If the amendment is adopted, the 1987 Plan will terminate on December 15,
2009, while currently it terminates December 15, 2004. In either case the 1987
Plan may be earlier terminated by the Board of Directors or extended with
approval of the stockholders of the Company.
Under the 1987 Plan if the amendment is adopted, the Company may make
grants to directors, officers or other key executive and management employees of
the Company as well as to non-employees. The number of grantees could vary from
year to year. Before the amendment, only employees and non-employee directors
were eligible to participate, and the non-employee directors received only
annual grants in fixed amounts, which had originally been 1,000 per year and was
increased to 3,000 shares per year. The Company has approximately 67 employees
who are eligible to participate in the 1987 Plan and currently has four
non-employee directors. Other non-employees would be eligible to participate in
the 1987 Plan. Non-employee directors receive annual option grants, currently at
the rate of 3,000 per year, an amount with is subject to change and may be
supplemented by other grants to one or more of such directors.
The 1987 Plan provides that it is to be administered by the Board of
Directors or, in the discretion of the Board of Directors, a 1987 Plan Committee
(each herein called the "Committee") appointed by the Board of Directors and
consisting of two or more directors. The Board of Directors also has discretion
to appoint various committees for various purposes of administering the 1987
Plan. The Committee has broad discretion, subject to the terms of the 1987 Plan,
to determine the persons entitled to receive grants; the terms and conditions on
which such options, SARs, shares or cash are granted; the amount of each such
grant; and the nature of the consideration to be paid upon exercise of options
or SARs granted under the 1987 Plan, which may, in the discretion of the
Committee, consist in whole or in part of cash or shares of the Company's Common
Stock.
19
<PAGE>
Options granted under the 1987 Plan may be either "incentive stock
options" within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended, or "non-qualified stock options," as determined by the
Committee at the time of grant. Options may be granted under the 1987 Plan for
terms not exceeding ten years from the date of grant. The per share exercise
price of options granted under the plan must be equal to or greater than the
fair market value of a share of Common Stock on the date of grant.
The Committee may award SARs in connection with options under the 1987
Plan. The grantee of an SAR receives, upon exercise of the SAR and the related
option, an amount equal to the difference between the then fair market value of
a share of Common Stock and the option price. Payment may be made, at the
discretion of the Committee, in cash, shares of Common Stock or both. The
related option will terminate upon exercise of an SAR. If an option is
exercised, any related SAR will terminate.
The Committee may grant performance awards which call for payment in
shares or cash if financial goals that are established by the Committee have
been met during an award period. Such shares are issued without receipt of
consideration other than services rendered by a grantee. To receive payment, a
grantee must remain in the employ of the company until the computation of the
payment, subject to exceptions made at the discretion of the Committee.
The Committee may also grant restricted shares of Common Stock. Such
shares cannot be transferred or voted and dividends thereon will not be paid
before the termination of the restriction period. If a grantee's employment
terminates during the restriction period, the grantee forfeits such shares,
subject to exceptions made in the discretion of the Committee.
The Committee establishes rules and regulations for the operation of the
1987 Plan, selects persons to receive grants, determines the fair market value
of stock for purposes of grants, and determines the number of shares subject to
grants.
No one person will receive more than 250,000 options or restricted shares
or share equivalents under performance awards or SARs under the 1987 Plan in any
one calendar year. It is not possible to state in advance the exact number or
identity of the future grantees or the amounts of future grants, except that it
is anticipated that options to purchase 250,000 will be granted in the aggregate
following the approval of the amendments by the stockholders and each
non-employee director will continue to receive an annual grant of nonqualified
options to purchase at least 2,000 shares.
It is presently intended that the additional shares and options authorized
by the amendment under the 1987 Plan will be registered on SEC Form S-8 under
the Securities Act of 1933. If, however, any of the additional shares and
options are not registered, grants may require a grantee to represent to the
Company in writing that he is accepting the grant or acquiring the shares
(unless they are covered by an effective registration statement under said Act)
for his own account for investment only, and shares could then only be resold by
the holder pursuant to an exemption from registration such as Rule 144 or
pursuant to registration on another form, such as on Form S-3.
The exercise price of options under the 1987 Plan may, in the discretion
of the Committee, be payable various forms, including in cash, by promissory
note, surrender of previously-owned shares, or a "cashless" exercise, or a
combination of these methods.
20
<PAGE>
The Committee, in its discretion, may agree that the Company will pay the
taxes due from a grantee upon grant or exercise, as the case may be.
Federal Income Tax Consequences
- -------------------------------
The following general discussion sets forth the Federal tax consequences
associated with grants by the Company under the 1987 Plan to grantees who are
not subject to Section 16(b) of the Securities Exchange Act of 1934.
Stock Options. The grant of an incentive stock option or a nonqualified
-------------
stock option will not result in income for the grantee or in a deduction for the
Company.
The exercise of a nonqualified stock option will result in ordinary income
to the optionee and a deduction for the Company measured by the difference
between the option price and the fair market value of the shares received at the
time of exercise. Income tax withholding will be required if the optionee is an
employee of the Company.
The exercise of an incentive stock option will not result in income to the
grantee so long as the grantee is an employee of the Company or a subsidiary of
the Company from the date of grant until three months before the exercise date.
If the grantee disposes of the shares within two years after the date of grant
of the option or one year after the exercise, any gain upon disposition of the
shares will be taxed to the employee as ordinary income and the Company will not
be entitled to a deduction. The excess of the market value of the shares on the
exercise date over the option price is an item of tax preference, potentially
subject to the alternative minimum tax in the year of exercise.
If the grantee disposes of the shares prior to the expiration of the
holding periods described above, the grantee will have taxable compensation, and
the Company will be entitled to a deduction equal to the lesser of the fair
market value of the shares on the exercise date minus the option price or the
amount realized on disposition minus the option price. Any gain in excess of the
ordinary income portion would be taxable as ordinary income.
SAR and Performance Award. The grant of an SAR or a Performance Award will
-------------------------
not result in income for the grantee or a deduction for the Company. Upon the
exercise of an SAR and the receipt of shares or cash under a Performance Award,
the grantee will recognize ordinary income and the Company will be entitled to a
deduction measured by the fair market value of the shares plus any cash
received. Income tax withholding will be required if the grantee is an employee.
Restricted Stock Grant. The grant of a Restricted Stock Grant will not
----------------------
result in immediate income for the grantee or in a deduction for the Company for
federal income tax purposes, assuming the shares transferred are not
transferable by the grantee and are subject to restrictions resulting in a
"substantial risk or forfeiture" as intended by the Company, unless the grantee
elects to be taxed immediately. If there is not such a restriction, the grantee
will recognize ordinary income upon receipt of the shares. Dividends paid while
the stock remains subject to restriction will be treated as compensation for
federal income tax purposes. At the time the restrictions lapse, the grantee
will receive ordinary income, and the Company will be entitled to a deduction
measured by the fair market value of the shares at the time of lapse. Income tax
withholding will be required if the grantee is an employee.
21
<PAGE>
Section 162(m) Limitations. Section 162 to the Internal Revenue Code of
--------------------------
1986, as amended (the "Code"), generally relates to income tax deductions for
business expenses. Section 162(m) of the Code limits the corporate income tax
deduction to $1,000,000 in any tax year attributable to compensations paid to
the Chief Executive Officer in that year or any of the four other executive
officers of the Company and its subsidiaries who were most highly paid in that
year. This rule generally applies to all deductible compensation paid to such an
individual. Exercise of nonqualified stock options, disqualifying dispositions
of stock received on exercise of an incentive stock option, and the lapsing of
restrictions on restricted stock result in an income tax deduction. The Code
Section 162(m) deduction limitation is not believed to apply to compensation
paid or deemed paid under the 1987 Plan, which is a stockholder-approved plan.
If more than $1,000,000 in one year in compensation is paid or deemed to be paid
pursuant to a plan that satisfies applicable requirements of Section 162(m), the
deduction is unlimited.
Future Amendments to the Plan.
- ------------------------------
The Board of Directors can amend the 1987 Plan as it deems advisable, but
unless the stockholders approve, no amendment can increase the maximum number of
shares of Common Stock subject to the 1987 Plan, materially modify the
requirements for eligibility in the 1987 Plan, or materially increase the
benefits accruing to grantees. In addition, no amendment can withdraw from the
Committee the right to select the persons who will receive grants.
Considerations for Grants
- -------------------------
The only considerations the Company receives or is to receive for grants
under the 1987 Plan are the services rendered for the Company by the
participants.
Market Value of the Securities Underlying the Plan
- --------------------------------------------------
As of January 11, 2000, the market value of a share of Common Stock was
$8.6875 as reported by The Nasdaq Stock Market. Excluding the indeterminate
number of shares that will be added by the future increases in annual
increments, the shares of Common Stock that would be subject to the 1987 Plan,
as of immediately after stockholder approval of the amendment, would have an
aggregate market value of approximately $21 million, at the above-mentioned
price and without deduction for the exercise prices payable to purchase shares.
Vote Required
The affirmative vote of the holders of a majority of the Common Stock of the
Company represented at the Annual Meeting and voting on Proposal 2 shall be
required to approve this proposal. Abstentions and broker non-votes will have no
legal effect upon the approval required. However, all such votes will count as a
part of establishing a quorum. The Board of Directors believes that the
amendment to the 1987 Plan is in the best interests of the Company because it
will further the purposes of the 1987 Plan of enhancing the ability of the
Company to attract, motivate and retain key personnel. THE BOARD OF DIRECTORS
RECOMMENDS THAT YOU VOTE FOR APPROVAL OF THE AMENDMENTS TO THE 1987 PLAN.
Proxies solicited by management will be voted FOR the proposal unless a vote
against the proposal or abstention is specifically indicated.
22
<PAGE>
STOCKHOLDER PROPOSALS
---------------------
Stockholder proposals intended to be considered at the 2001 Annual
Meeting of Stockholders must be received by the Company no later than September
28, 2000. Such proposals may be included in next year's Proxy Statement if they
comply with certain rules and regulations promulgated by the SEC.
INDEPENDENT ACCOUNTANTS
-----------------------
PricewaterhouseCoopers, independent accountants for the Company for the
fiscal year ended October 3, 1999, has been selected by the Board of Directors
to serve in the same capacity for the current fiscal year.
A representative of PricewaterhouseCoopers is expected to be present at
the Meeting with the opportunity to make a statement if he or she so desires and
to be available to respond to appropriate questions.
OTHER MATTERS
-------------
The Board of Directors is not aware of any matter which will be presented
for action at the Meeting other than the matters set forth herein; but should
any other matter requiring a vote of the stockholders arise, it is intended that
the enclosed Proxy include discretionary authority to vote on such other matters
in accordance with the interests of the Company, in the best judgment of the
person or persons voting the Proxies. In addition, the enclosed Proxy is
intended to include discretionary authority to postpone or adjourn the meeting,
to vote for any person's election to a position for which a bona fide nominee is
named herein if such nominee named herein is unable to serve or for good cause
will not serve, approval of minutes of the prior meeting without ratifying the
actions taken at such meeting and any matters incident to the conduct of the
Meeting.
All stockholders are urged to complete, sign, date and promptly return
the enclosed Proxy.
By Order of the Board of Directors,
Santa Ana, California /s/ DAVID R. SONKSEN
January 20, 2000 --------------------------------------
David R. Sonksen, Secretary
23
